If a contractor has a written contract based on "time and material", what should be done regarding future overhead cost increases?

In a "time and material" contract, the contractor is typically paid for the actual time spent on the project and for the materials used. This means that labor costs and material expenses are directly billed to the client based on the actual quantities and hours worked.

Overhead costs, which include indirect costs such as utilities, administrative expenses, and other costs of doing business, do not fluctuate as a direct result of time spent on a particular job or materials used during that time. Since these contracts are structured to account for labor and material costs specifically, any increases in overhead costs do not necessitate immediate action within the confines of this type of agreement. Therefore, there is no requirement to renegotiate or revise terms just because overhead costs have increased.

This understanding highlights the key characteristic of "time and material" contracts, keeping the focus on the direct costs associated with labor and materials rather than the broader operational expenses that may fluctuate over time.